Osborne appoints critic to top job at Treasury watchdog

The Chancellor has recruited one of his most trenchant critics to head the Office for Budget Responsibility (OBR) – the Treasury watchdog responsible for economic forecasts.

The widely respected Robert Chote, who has served for eight years as director of the Institute for Fiscal Studies (IFS), an independent think-tank, will succeed Sir Alan Budd as chairman of the OBR in time to issue a verdict on the Government's comprehensive spending review on 20 October. If he is to make much impact on that, he will have to be at his desk by about this time next month.

Mr Chote's appointment is bold, and his past outspokenness is likely to do much to restore faith in the integrity of the OBR. The early weeks of its existence were overshadowed by political controversy when Sir Alan released crucial unemployment forecasts shortly before a session of Prime Minister's Questions, where the issue was raised by the acting Labour leader, Harriet Harman.

News of Sir Alan's retirement from the OBR followed soon after. Although official sources maintained that he was only ever supposed to serve a very short stint to establish the body, and also pointed out that he was 73, some of George Osborne's public statements gave the impression that Sir Alan was expected to serve for rather longer, and the Treasury Select Committee criticised him for his for "naivety".

Yesterday, the Chancellor said Mr Chote's experience was "beyond doubt" and he was "one of the most credible independent voices on public finances, taxation and public spending". Mr Chote's appointment will have to be ratified by the Treasury Committee but this should prove a formality.

Mr Chote said: "The creation of the OBR is a great opportunity to ensure that the tax and spending decisions of this and future governments are informed by demonstrably rigorous and independent analysis of the outlook for the public finances and the economy.

"I will ensure the OBR draws on the fullest possible range of information and expertise, from within government and without. We will make and present our judgements without fear or favour."

Mr Chote, a former journalist with The Independent and the Financial Times, has proved an enthusiastic troublemaker, most recently entering into what was, for ministers, a damaging row about whether the emergency Budget was "fair" and progressive, as Mr Osborne claimed. The IFS evidence that the Budget was "regressive" was rejected by the Treasury as a "partial" view of its effects but it damaged Mr Osborne. He may now be relieved that his former tormentor may become at least semi-domesticated.

However, Mr Chote's most recent utterances suggest he is keen to be even more transparent than Sir Alan, and may press for a more radical remit for the OBR to be enshrined in legislation due to be put to Parliament this autumn. He said last month: "I think anybody running this body would see their primary and ultimate responsibility being to the general public."

One important decision – of substance as well as style in the light of Sir Alan's fate – will be whether Mr Chote chooses to intervene on the more politically sensitive aspects of the public finances as they arise. In due course, he may find himself in the bizarre position of arguing with his successor as director of the IFS.

In recent weeks, the IFS has demonstrated that its role as an independent arbiter of Treasury policy has not been undermined by the OBR. To the irritation of the incoming Government, a tradition has grown up in recent years that the true picture of what was going on in the public finances could not be judged on Treasury documents and the Chancellor's speech, but had to await the IFS's verdict, usually delivered in a series of challenging PowerPoint presentations the following day. The OBR was thus partly designed to put the IFS out of business and restore faith in the integrity of the Treasury.

Known for his dapper suits, suede-like hairstyle and gift for explaining complexities, Mr Chote arrives at the OBR with an impressive track record. He has advised the International Monetary Fund and is a member of Cambridge University's finance committee.